Principal Issues: [TaxInterpretations translation] Is a guaranteed investment certificate or term deposit, denominated in Canadian or foreign currency, issued by a bank in Canada or a trust company a qualified investment for an RRSP?
Position: Where issued by a bank, it could be considered a qualified investment specifically described in paragraph (b) of the definition of qualified investment in subsection 146(1). A guaranteed investment certificate, denominated in Canadian or foreign currency, issued by a trust company, whether federally or provincially incorporated, could be a qualified investment under paragraph (f) of section 204. A term deposit, denominated in Canadian or foreign currency, issued by a trust company could be a "deposit" within the meaning of the CDICA and could be a qualified investment for the purposes of paragraph (a) of section 204. On the other hand, in some cases, a term deposit would not be a qualified investment if it is money received for which the CDICA member institution has issued or is required to issue a document that is payable outside Canada or in foreign currency.
Reasons: In general, a guaranteed investment certificate or term deposit issued by a bank in Canada is considered a "bond, note or similar security".
A term deposit, issued by a trust company, denominated in a foreign currency, may not be a deposit within the meaning of CDICA because of subsection 2(6) of the Schedule to CDICA, which states that moneys received by a CDICA member institution for which it has issued or is obligated to issue an instrument of indebtedness that is payable outside Canada or in a foreign currency does not constitute a deposit.
Question 15
Paragraph 14 of Interpretation Bulletin IT-320R3 states, inter alia, the following:
“A deposit of money is a qualified investment if it is an amount defined to be a deposit by the Canada Deposit Insurance Corporation Act [CDICA] or an amount on deposit with a branch in Canada of a bank (including, after June 27, 1999, a branch in Canada of an authorized foreign bank).”
Is a guaranteed investment certificate or term deposit denominated in Canadian or foreign currency issued by a bank in Canada or a trust company a qualified investment for an RRSP?
Response
Whether property is a qualified investment for an RRSP trust is a question that must be considered in light of all the relevant facts of a particular situation.
We are of the view that, in general, a guaranteed investment certificate or term deposit, denominated in Canadian or foreign currency and issued by a bank in Canada, would qualify as a bond, debenture, note or similar obligation” specifically described in paragraph (b) of the definition of "qualified investment" in subsection 146(1).
Furthermore, a guaranteed investment certificate, denominated in Canadian or foreign currency, issued by a trust company incorporated under the laws of Canada or of a province could qualify as a qualified investment under paragraph (f) of the definition of qualified investment in section 204.
Finally, a term deposit, with a term of 5 years or less, denominated in Canadian or foreign currency, issued by a trust company that is a federal institution or a provincial institution within the meaning of the CDICA, could qualify as a qualified investment under paragraph (a) of the definition of "qualified investment" in section 204. However, in some cases, a term deposit issued by such a trust company may not be a deposit within the meaning of the CDICA and may not be a qualified investment. That would be the case where it is money received for which an institution that is a member of CDICA has issued or is obligated to deliver an instrument of indebtedness that is payable outside Canada or in a foreign currency in accordance with subsection 2(6) of the CDSA Schedule.
Adèle St-Amour
998-0290
2005-016154
May 4, 2006